Hold Mahindra and Mahindra Financial Services; target of Rs 280: Prabhudas Lilladher

Prabhudas Lilladher's research report on Mahindra and Mahindra Financial Services

Mahindra & Mahindra Financial Services (MMFS) reported healthy AUM growth at Rs827bn (+27.4%YoY/ 7.0%QoQ) in Q4 with stable margins of 7.4% amid rising interest cost environment. Write-offs of Rs6.0bn were taken compared to Rs4.9bn taken in Q3FY23. Primary focus of the management is to better asset quality and customer experience and choose right customers to mitigate credit risk. Maintain ‘HOLD’ rating on the stock. Re-rating can happen if MMFS continues to show strong AUM growth and write-offs start reducing on a QoQ basis. Maintain ‘HOLD’.

Outlook

We maintain ‘HOLD’ rating and increase TP to Rs280 (1.9x on Sep’24E PABV) from Rs260 (earlier:1.9x Sep’24E PABV) as we increase our FY24/25 NII estimates by 3.1%/2.5%, given increase in FY24/25E AUM growth to 20.0%/20.0% (from 15%/15.0% earlier).

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